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Libor, long the most important number in finance, dies at 52

nytimes.com

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Re: Libor, long the most important number in finance, dies at 52

#131

Post by colordrops »

decafninja wrote: post #23

I was working at an investment bank (as a developer) when this scandal hit. My entire department was laid off as a result. Not because we were involved or complicit in the scandal, but because the scandal indirectly caused a big financial hit to the bank and we were part of the cost cutting measures. It was a traumatic and tragic moment for me at the time. But in hindsight it was the event that lead to my eyes being…

> I had naively thought that working as a developer in the IT departments of Wall Street investment banks and hedge funds* was the pinnacle of a SWE career.

What was the reasoning behind this thinking? While finance often does have some pretty advanced tech behind it, you can find more cutting edge and complex work at purely technical companies. Or are you speaking of compensation?

Re: Libor, long the most important number in finance, dies at 52

#132

Post by neil_s »

sneak wrote: post #123

> It turned out that bankers had been coordinating with one another to manipulate the rate, pronounced “LIE-bore,” by skewing the number higher or lower for their banks’ gain. It's rare to see shade thrown so overtly in the Times, because it's so rare it can be done this deniably, and always makes me chuckle when it does.

OMG, I was wondering why they waited so far down in the article to describe the pronunciation. Only after seeing your comment did it click!

Re: Libor, long the most important number in finance, dies at 52

#133

Post by Jenk »

colordrops wrote: post #131
decafninja wrote: post #23

I was working at an investment bank (as a developer) when this scandal hit. My entire department was laid off as a result. Not because we were involved or complicit in the scandal, but because the scandal indirectly caused a big financial hit to the bank and we were part of the cost cutting measures. It was a traumatic and tragic moment for me at the time. But in hindsight it was the event that lead to my eyes being…

> I had naively thought that working as a developer in the IT departments of Wall Street investment banks and hedge funds* was the pinnacle of a SWE career. What was the reasoning behind this thinking? While finance often does have some pretty advanced tech behind it, you can find more cutting edge and complex work at purely technical companies. Or are you speaking of compensation?

I'm not GP but in the 90s I was taught that bigger = better, and to some degree that was true, if you were into old (ergo, very expensive) tech.

In the days before the internet, technology was niche (as was the knowledge to develop and operate it) and super expensive, so only mega corps had decent tech to work with.

This reputation persisted for sometime into the new millennium until we started to see more of these scruffy younguns starting to make noise in the business, and techno, spheres.

Re: Libor, long the most important number in finance, dies at 52

#134

Post by dang »

erwincoumans wrote: post #27

From the title it seems like Mr. or Dr. Libor died. For a paragraph, it is cute to have Libor personified. Doing it until the end of the story feels a bit artificial to me.

It did seem odd for NYT, and a bit of an annoying distraction in an important story. On the other hand, I'm surprised they let someone experiment like that.

Re: Libor, long the most important number in finance, dies at 52

#135

Post by DwnVoteHoneyPot »

CraigJPerry wrote: post #108
fanzhang wrote: post #45

When I first heard about LIBOR in 2002, I was surprised that the number is just based on a survey of bankers. Surely there would be accuracy issues with that? But at that time I was young and had no finance experience, so though that the adults in the room knew best. Turns out not! I don't think the base problem is that people shaded their numbers one way or another, it's that the system is designed wrong.

>> I was surprised that the number is just based on a survey of bankers The numbers that LIBOR is measuring ultimately represent a human’s opinion. Well, it’s the opinions of several humans then the highest and lowest opinions get discarded and the rest averaged. It’s not measuring a value derived deterministically from some inputs, so how else could you capture it?

It's being replaced by historical market transaction data. Like stocks prices are based on last price.

Re: Libor, long the most important number in finance, dies at 52

#136

Post by jrochkind1 »

SkyMarshal wrote: post #79
fanzhang wrote: post #45

When I first heard about LIBOR in 2002, I was surprised that the number is just based on a survey of bankers. Surely there would be accuracy issues with that? But at that time I was young and had no finance experience, so though that the adults in the room knew best. Turns out not! I don't think the base problem is that people shaded their numbers one way or another, it's that the system is designed wrong.

The more I've learned of the banking system, the more examples of this I see. It seems that much of the banking system was designed by bottom-line-oriented, non-systems-thinkers, who just wanted an immediate, good-enough solution to a problem. Accuracy, reproducibility, scalability, systemic integrity, and similar concerns often weren't a factor.

bottom-line-oriented bankers?!? Well, I never!

Re: Libor, long the most important number in finance, dies at 52

#137

Post by whimsicalism »

splittingTimes wrote: post #56
lordnacho wrote: post #39

I traded LIBOR instruments that were probably manipulated, and there was suspicion at the time. Same with FX, there was a cartel manipulating that as well, and people in my firm also wondered at times why things were moving around at the exact wrong time. It's probably best that the LIBOR system goes in favor of something more transparent. But I have a friend who is involved in the transition at a bank, and it's incr…

The Libor - interest rates scandal is only one in a long list of documented manipulations in the last 5-10 years ISDAfix - swaps Platts - oil prices WM/Reuters - FX High-Frequency Trading - equities Commodities - Gold, Silver Stock indices Are all rigged. With that history, how can we give that new system the benefit of a doubt. It will be gamed as well.

> High-Frequency Trading - equities

> Commodities - Gold, Silver Stock indices

?

It doesn't help for FX that it is effectively unregulated.

Re: Libor, long the most important number in finance, dies at 52

#138

Post by FredPret »

NoboruWataya wrote: post #95
kaesar14 wrote: post #51

Earlier quoted context omitted.

This was also my impression learning about it as I was starting to learn about global finance in high school. Even them it seemed ridiculous. I wonder how many more systems currently in place are based on such foolish promises and easily exploited foundations of trust.

Trust is central to the financial system, for better or worse. The whole thing is based on trust - whether it's trust in the person on the other end of the phone, trust in the big-name bank that person works for, or trust in that bank's regulator. This seems stupid to some tech people, who try to disrupt it by creating trustless systems such as distributed ledgers. But trust keeps on creeping back into the system. Th…

Or we can call it the Hash-based Ordinary Daily Lending Rate

Re: Libor, long the most important number in finance, dies at 52

#139

Post by sneak »

neil_s wrote: post #132
sneak wrote: post #123

> It turned out that bankers had been coordinating with one another to manipulate the rate, pronounced “LIE-bore,” by skewing the number higher or lower for their banks’ gain. It's rare to see shade thrown so overtly in the Times, because it's so rare it can be done this deniably, and always makes me chuckle when it does.

OMG, I was wondering why they waited so far down in the article to describe the pronunciation. Only after seeing your comment did it click!

The Grey Lady maintains plausible deniability at (in?) all times. :)

Re: Libor, long the most important number in finance, dies at 52

#140

Post by decafninja »

Jenk wrote: post #133
colordrops wrote: post #131

Earlier quoted context omitted.

> I had naively thought that working as a developer in the IT departments of Wall Street investment banks and hedge funds* was the pinnacle of a SWE career. What was the reasoning behind this thinking? While finance often does have some pretty advanced tech behind it, you can find more cutting edge and complex work at purely technical companies. Or are you speaking of compensation?

I'm not GP but in the 90s I was taught that bigger = better, and to some degree that was true, if you were into old (ergo, very expensive) tech. In the days before the internet, technology was niche (as was the knowledge to develop and operate it) and super expensive, so only mega corps had decent tech to work with. This reputation persisted for sometime into the new millennium until we started to see more of these s…

GP here. I started my career in the mid-late 2000s. For me some of the reasons that I remember are:

1. Just plain old not knowing better.

2. Being in NYC, my social circle had a lot of Wall Street finance types. In fact, this is still true - I know more finance people amongst my friends than fellow SWEs.

3. Hacker tech culture wasn't as widespread or widely known back then, especially in NYC. Or maybe it was just me. Going back to #1, I thought things couldn't get any better than dressing up in business casual monkey suits every morning and being ordered to dance like a monkey by a hotshot trader in hopes of picking up after his glorious scraps.

4. I thought the money wasn't half bad, making like $80-90k back then. I thought no one could pay better than the Masters of the Universe on Wall Street.

I don't know what a company like Google was paying their engineers back then, but I think it's a somewhat recent phenomenon where tech SWE compensation grossly and utterly outpaced tech-in-finance SWE compensation. Again, I'm not referring to ultra-elite finance firms like Jane Street or Citadel where I understand SWEs do get paid on par (or better) than FAANG.

I distinctly recall even ignoring a Google recruiter's solicitations back then (2007? 2008?) because I naively thought working at my investment bank was utterly superior to anything Google could offer.

Now I know better, and knowing is half the battle.

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